Header Menu

Facebook Plunges Into Bear Market, Wipes Out $132 Billion In Value

Update 2: Well that escalated quickly: FB is now down over 20% from its closing highs, losing over $130 billion in market value and erasing all of post-Q1 earnings gains, making Mark Zuckerberg $16 billion poorer, and officially entering a bear market.

Nasdaq is trading down 1.5%...

This has erased all of 2018's gains...

Zuck just lost $20 billion after hours...

Is it any wonder he has been selling to the max...?

Wondering what to do? Ask an analyst...

* * *

Update 1: The conference call is not going well, after Zuckerberg admits:

*FB: TOTAL REV. GROWTH RATES TO CONTINUE TO DECELERATE IN 2H

*FB SEES TOTAL REV GROWTH RATES DOWN HIGH SINGLE DIGITS 3Q, 4Q

And shares collapsed...now down 16% After hours

To put this move in context, FB is now at its lowest since late April...

And it is crushing Nasdaq...

Need a drink Mark?

* * *

Facebook shares were bid all day ahead of earnings, closing at a record high - up over 35% since the last earnings on April 25th - despite warnings of higher costs, lower user engagement, and investment in "time well spent" -- a term invented by a former Google employee to tackle the problems of technology addiction.

That was the good news.

The bad news is that despite beating on earnings (Facebook 2Q EPS $1.74, Est. $1.72), Facebook shares are crashing as much as 10% after hours following a miss on revenues (the first for the company since 2015), MAUs, and DAUs...

Facebook 2Q Rev. $13.23B, Est. $13.33B (+42% YoY)

MAU 2.23BN, EXP 2.25BN

DAU 1.47BN, Exp. 1.48BN

Notably Q2 2018 Revenues for US are below Q4 2017 revenues...

Facebook 2Q Monthly Active Users 2.23B, Est. 2.25B (+11% YoY)

US MAUs were unchanged but EU MAUs fell from 377mm to 376mm

This is the weakest MAU growth on record..

Facebook 2Q Daily Active Users 1.47B, Est. 1.48B (+11% YoY)

Under the hood, US DAUs were unchanged but EU DAUs fell from 282mm to 279m...

“The core Facebook platform is declining,” said Brian Wieser, an analyst at Pivotal Research Group.

FB shares are down around 10% after-hours...

The size of the drop likely reflects the fact that this is a rare occurrence for a company that has consistently beat analyst and investor expectations.

Other details include:

Mobile advertising revenue – Mobile advertising revenue represented approximately 91% of advertising revenue for the second quarter of 2018, up from approximately 87% of advertising revenue in the second quarter of 2017.

Capital expenditures – Capital expenditures for the second quarter of 2018 were $3.46 billion.
Cash and cash equivalents and marketable securities – Cash and cash equivalents and marketable securities were $42.31 billion at the end of the second quarter of 2018.

Headcount – Headcount was 30,275 as of June 30, 2018, an increase of 47% year-over-year.

A massive rise in headcount appears to confirm that analysts dramatically underestimated the impact of Facebook's scandals on user engagement. Who could have guessed - an army of free speech censors and the exposure of various privacy invasions may have spooked more than a handful of potential users.

All of which meant that operating margins also declined to 44 percent from 47 percent a year earlier. Facebook is feeling the pressure from all of its expenditures on content moderation, Facebook Watch, and other experiments.

Finally, this is what happens when the government tells you to hire more people to check the millions of posts published daily on FB: free cash flow plummets:

From CEO Zuckerberg in the press release:

"Our community and business continue to grow quickly," Zuckerberg said.

"We are committed to investing to keep people safe and secure, and to keep building meaningful new ways to help people connect."

Facebook hasn't missed top line estimates since 2015...so it's different this time? Or BTFD?

Facebook's crashing share price in extended trading has wiped $6.7 billion from Zuckerberg's net worth as of 4:10 p.m. in New York